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A&O Shearman merger vote to kick off this month as pensions issues overcome

Allen & Overy and Shearman & Sterling today (18 September) announced that their respective partnerships will start voting on their proposed merger on 28 September, with the voting window to close on 13 October and results announced soon after. For the merger to be voted through, 75% of the partnerships will have to vote in favour of the deal.

‘Over the past few months, partners and teams from both firms have been meeting and building relationships, and the excitement about the opportunities for the merged firm is palpable’, said A&O senior partner Wim Dejonghe (pictured) in a statement.

‘We have made significant progress since announcing the combination, and our clients have expressed enthusiasm for the combination and for what A&O Shearman will be able to deliver’, agreed Shearman senior partner Adam Hakki. ‘Our partners and colleagues are very much supportive and eager to launch the combined firm.’

Over the summer, Dejonghe and Hakki made several ‘roadshow’ trips to many of the two firms’ offices around the world to field questions from partners and to bolster support for the combination.

Now, the two firms also report ‘the successful completion of a number of key transaction milestones’, including financial and operational due diligence and ‘the filing of requests for antitrust clearances’. Crucially, the statement also confirms ‘the completion of approval for all required modifications to retirement and pension programs.’

Many in the market saw Shearman’s pension liabilities as the biggest potential sticking point for the merger, and they are widely considered to have been the issue that caused Hogan Lovells to walk away from its own mooted combination with Shearman in March.

Comments in September from Hogan Lovells’ chief executive Miguel Zaldivar did little to dispel this perception: ‘We are not interested in deals that come with significant pension obligations, debts, or firms that have experienced a drop in revenue, talent, or partners.’

A&O has continued a spate of hiring activity in the months since the merger was announced, in particular in the US, though it did see some losses in other regions. The firm also faced some disruption with the shock resignation in July of managing partner Gareth Price, ‘for personal reasons’, with Abu Dhabi capital markets partner Khalid Garousha named as interim managing partner two weeks later.

Shearman, meanwhile, has faced a steady trickle of partner departures, including in July the loss of five partners in one week across its London and Washington DC offices.

Few in the market view these departures as cause for concern, however, and most accept that some level of rationalisation is a natural part of a merger of this scale.

The two firms themselves remain optimistic. The official announcement notes that ‘all transaction milestones have been met thus far and support for the combination among clients, partners, and colleagues has been overwhelmingly positive worldwide.’

With the pension issue put to bed, this confidence may prove well-founded.